MyCiTi faces R52m deficit

Cape Town - Faced with a “worst-case scenario” of a R52 million deficit for the MyCiTi service in the 2016/2017 financial year, the City of Cape Town is looking at business models that will allow the minibus taxi industry and MyCiTi buses to share routes.

There are also plans to hike fares so that the city can bring in an extra R20m to help make up the shortfall.

In a report approved on Thursday by the city’s mayoral committee, Transport for Cape Town said the principle of “completely replacing minibus taxis on MyCiTi routes is no longer considered viable in light of challenges and inefficiencies experienced in Phase 1…”

The report deals with the updated MyCiTi business plan for 2015 – a revised version of the previous plan approved in 2012 for Phase 1A, 1B and the N2 Express.

Brett Herron, mayoral committee member for Transport for Cape Town, said after the meeting that the R52m was a “projected worse case scenario deficit” if the city did not make the adjustments set out in a five-part strategy.

“It is our intention to operate the service at the current high standard in a financially sustainable and viable way by taking steps to make sure there is no real deficit when we get to those outer years.”

Herron said the report, which highlighted several financial changes, including lower than anticipated fare revenue and less government funding, should not be taken out of context to create “unnecessary hysteria”.

“We have identified a potential risk, are reporting on it, and also outlining the steps we are taking to eliminate that risk from materialising.”

The city has invested R6.5 billion in the MyCiTi bus service to date.

According to Transport for Cape Town, discussions have already started with members of the taxi industry and MyCiTi vehicle operators to look at a hybrid model where both would operate on MyCiTi routes.

Proposed measures include allowing minibus taxi operators that are financially viable in their own right to operate alongside the MyCiTi service, and not in competition.

On routes where the MyCiTi was able to provide a complete service, the city would try to remove all the remaining minibus taxi operators to minimise potential competition. However, on routes where the MyCiTi was unable to meet on-peak demand, the city would consider allowing a limited number of taxis to operate. These taxis would not be allowed to operate on the routes in off-peak periods. The city would also encourage minibus taxi passengers to move to the MyCiTi service on routes where the municipal bus service was running at capacity.

Transport for Cape Town said national government funding for ancillary operating costs would drop from 70 percent of costs to 50 percent in the 2016/2017 financial year for most routes.

Currently, the city uses up to 4 percent of its rates income to contribute to the associated recurrent costs of the MyCiTi service. In the 2014/2015 financial year, this was about R237m. But with less funding from national government, the city would need to allocate more than 4 percent of its rates income if it did not consider alternative measures to meet the deficit.

The city has already asked the national Treasury for the ratio to remain at 70/30 rather than drop to 50/50. If it does drop, the city will face a deficit of R52m after funding in the 2016/2017 financial year.

Transport for Cape Town has therefore proposed several cost-saving measures to reduce the deficit. The biggest target is to bring in an extra R20m in revenue by pushing up fares. Efforts will also be made to cut costs by reviewing fuel consumption rates and maintenance costs for vehicle operating companies.

Since January, the MyCiTi service has recorded more than 23.3 million passenger journeys.

Transport for Cape Town said capital and operating costs for the MyCiTi system were higher than initially expected. The current provisions from the national government would not be enough to keep pace with increasing operational costs. If the MyCiTi system is extended across the city, the existing provisions will not be enough to ensure the sustainability of the service without an unreasonably high contribution from the city.

If national government funding for the implementation of the project is also considerably less, the city may be forced to put the brakes on the rollout of projects in Phase two. “This is of concern as the need in Phase two is substantial,” said Transport for Cape Town.

Herron said: “Both the national government and the city are seeking funding and implementation approaches which, while ensuring high service standards, also incentivise the containment of costs and encourage prudent spending. By including the private sector and roleplayers from the industry on a competitive basis where feasible, but retaining public control over the overall network, costs can be contained.”

The mayoral committee agreed that the updated business plan be referred to the full council next week for approval.

Cape Argus